Revised Schedule VI

Vinod Kothari

http://www.vinodkothari.com http://www vinodkothari com 1012 Krishna 224 AJC Bose Road Kolkata - 700 017. India
E-mail: vinod@vinodkothari.com Phone 91-33-22817715/ 228113742/ 22811276 Fax: 91-33- 22811276/ 22813742

copyright
This Presentation is the property of Vinod Kothari and no part of it can be copied, reproduced or distributed in any manner.

Key highlights
Effective date: Financial year commencing on or after 1st April, 2011, vide S.O. No. 447(E), dated 28th February, 2011 The change are unrelated to convergence to IFRS
Nevertheless, the changes to a large extent indicate move towards IAS 1 India did not have a local standard equivalent of IAS 1
The revised Schedule VI fills that gap

The process of revision started in Nov 2008 when a Memorandum of revision of Schedule VI was put on MCA site M i differences Main diff between b t proposed d draft d ft and d the th revised i d Schedule S h d l VI
In the proposed draft, there were two formats of Schedule VI, one for SMCs (so-called (so called Saral Schedule VI), and one for other companies Current Schedule VI is common for all companies

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How is it in other countries

In India, the format of financial statemnets is prescribed under Schedule VI to the Companies Act, 1956 Companies Bill 2009 does not intend to have a schedule
Will lay down format by way of rules

IAS 1 provides general principles for presentation of financial statements

International Accounting standards lay down minimum disclosure requirements, with a break-down for presentation of assets, liabilities, incomes and expenses However, do not lay down any form as such

UK Companies Act 2006 also lays down statutory format of financial statements
Pursuant to this, Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 have been drawn up

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Key features
Presentation
Horizontal or T form of balance sheet gone vertical form laid down Existing Schedule VI did not have a format for P/L account
Revised R i d Schedule S h d l lays l a multi-step lti t f format tf for P/L account t

Classification of assets, liabilities and provisions is based on liquidity rather than nature
Existing distinction between fixed assets, investments, etc. goes away Even E en provisions pro isions disting distinguished ished based on long-term long term and short-term short term pro provisions isions

Classification of expenses
Based on function, rather than nature

Prominence to accounting standards

Gen Ins 1 grants primacy to accounting standards:
Even in future, if accounting standards change, leaving a conflict between the AS and the Schedule, AS shall prevail

Schedule VI shall stand modified according to changes in accounting standards Disclosures required by ASs and by the law to be made by way of notes notes, unless required on the face of the financial statements

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General instructions
There were no general instructions to old Schedule VI General Instructions contain significant principles p p of disclosure There are separate general instructions for B/S and P/L account

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Notes to accounts
Gen Ins no 3
Notes provide information that is not required to be put on the face of financial statements Narrative description of items Disaggregation of information

Compare this with Para 7 of IAS 1 almost the same language Cross referencing of items on the face of the Statements with the Notes Level of detailing:
Balance between too much aggregation and too much information Principles of aggregation in IAS 1:
Para 30 dissimilar items are presented separately If an individual item is not sufficiently material, it may be aggregated What is not sufficiently y material on the face of financial statements may y be sufficiently material for the purpose of Notes What is material no mathematical test, but Framework provides for a cut off or threshold point, rather than qualitative characteristic

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Rounding off
Consistent rounding off rules based on turnover
Where turnover upto Rs 100 crores hundreds, thousands, lakhs or millions Where turnover exceeding Rs 100 crores lakhs, millions or crores

Companies earlier had to take special approvals for putting numbers in millions for international comparison

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Depiction of the liability side of balance sheet

Shareholders funds
Share Capital Reserves and surpluses Share warrants

Share application money pending allotment Non current liabilities

Long term borrowings Deferred tax liabilities (net) Other Long g term liabilities Long-term provisions Short-term borrowings Trade payables Other current liabilities Short-term provisions

Current liabilities

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Depiction of the asset side of the balance sheet

Non-current assets
Fixed assets
Tangible assets Intangible assets Capital work-in-progress Intangible assets under development

Non-current investments Deferred tax assets (net) Long-term loans and advances Other non-current assets Current investments Inventories Trade receivables Cash and cash equivalents Short-term loans and advances Other current assets

Current assets

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Current assets
Definition in Schedule VI: An asset shall be classified as current when it satisfies any of the following criteria:
it is expected to be realized in, or is intended for sale or consumption in, the companys normal l operating i cycle; l it is held primarily for the purpose of being traded; it is expected to be realized within twelve months after the reporting date; or it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.

Definition in IAS 1: an asset that the entity

expects to realise the asset, or intends to sell or consume it, in its normal operating cycle; it holds the asset primarily for the purpose of trading; it expects to realise the asset within twelve months after the reporting period; or the asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

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Current assets (contd)

Meaning of cash equivalent:
Short term, highly liquid investments that are readily convertible into cash, with insignificant risk of changes in value [IAS 7]

Meaning of operating cycle Defined in Schedule VI: An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. Where the normal operating cycle cannot be identified, it is assumed to have a duration of 12 months. [IAS 1: The operating cycle of an entity is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents equivalents. When the entitys normal operating cycle is not clearly identifiable, it is assumed to be twelve months. Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realised as part of the normal operating cycle even when they are not expected to be realised within twelve months after the reporting period. Current assets also include assets held primarily for the purpose of trading (examples include some financial assets classified as held for trading in accordance with IAS 39) and the current portion of non-current financial assets. Examples:
In case of a financial entity, y loans are current assets In case of a distillery/winery, wines in the process of maturing will be current assets even if it takes several years to mature For a builder, buildings under construction are current assets For a person trading in buildings, a stock of buildings meant for resale is a current asset

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Current assets (contd)

All assets other than current assets are noncurrent assets

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Current liabilities
If it satisfies any of the following criteria
it is expected to be settled in the companys normal operating cycle; it is held primarily for the purpose of being traded; it is due to be settled within twelve months after the reporting date; or the company does not have an unconditional right to defer y for at least twelve months after the reporting g settlement of the liability date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

IAS 1 definition:
What is current liability
it expects to settle the liability in its normal operating cycle; it holds the liability primarily for the purpose of trading; the liability is due to be settled within twelve months after the reporting period; or the entity does not have an unconditional right to defer settlement y for at least twelve months after the reporting p g period. p of the liability

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Trade receivables and trade payables

A receivable shall be classified as a trade receivable if it is in respect of the amount due on receivable account of goods sold or services rendered in the normal course of business. A payable shall be classified as a trade payable if it is in respect of the amount due on account of goods purchased or services received in the normal course of business.

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Details of share capital

Share Capitalfor each class of share capital (different classes of preference shares to be treated separately): The number and amount of shares authorized; the number of shares issued, subscribed and fully paid, and subscribed but not fully paid par value per share; a reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period; the rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution of dividends and the repayment of capital shares in respect of each class in the company held by its holding company or its ultimate holding company including shares held by or by subsidiaries or associates of the holding company or the ultimate holding company in aggregate; shares in the company held by each shareholder holding more than 5 percent shares specifying the number of shares held; shares reserved for issue under options and contracts/commitments for the sale of shares/disinvestment, including the terms and amounts; For the period of five years immediately preceding the date as at which the Balance Sheet is prepared
Aggregate number and class of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash. Aggregate number and class of shares allotted as fully paid up by way of bonus shares shares. Aggregate number and class of shares bought back.

Terms of any securities convertible into equity/preference shares issued along with the earliest date of conversion in descending order starting from the farthest such date. Calls unpaid (showing aggregate value of calls unpaid by directors and officers) Forfeited shares (amount originally paid up)

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Details of reserves and surpluses

Reserves and Surplus shall be classified as:
Capital Reserves ; Capital Redemption Reserve; S Securities iti P Premium i R Reserve; Debenture Redemption Reserve; Revaluation Reserve; Share Options Outstanding Account; Oth Reserves Other R (specify ( if th the nature t and d purpose of f each h reserve and d the th amount t in i respect thereof); Surplus i.e. balance in Statement of Profit & Loss disclosing allocations and appropriations such as dividend, bonus shares and transfer to/from reserves etc. (Additions and deductions since last balance sheet to be shown under each of the specified heads)

A reserve specifically represented by earmarked investments shall be termed as a fund. Debit balance of statement of profit and loss shall be shown as a negative figure under the head Surplus. Similarly, the balance of Reserves and Surplus, after adjusting negative balance of surplus, if any, shall be shown under the head Reserves and Surplus even if the resulting figure is in the negative.

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Details of Long term borrowings

Long-term borrowings shall be classified as:
Bonds/debentures. Term loans
from banks. from other parties.

Deferred payment liabilities. Deposits. Loans and advances from related parties. Long term maturities of finance lease obligations Oth loans Other l and d advances d (specify ( if nature). t )

Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each case. Where loans have been guaranteed by directors or others others, the aggregate amount of such loans under each head shall be disclosed.

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Details of long-term borrowings contd

Bonds/debentures (along with the rate of interest and particulars of redemption or conversion, as the case may be) shall be stated in g order of maturity y or conversion, , starting g from farthest descending redemption or conversion date, as the case may be. Where bonds/debentures are redeemable by installments, the date of maturity for this purpose must be reckoned as the date on which the first installment becomes due due. Particulars of any redeemed bonds/ debentures which the company has power to reissue shall be disclosed. Terms of repayment of term loans and other loans shall be stated stated. Period and amount of continuing default as on the balance sheet date in repayment of loans and interest, shall be specified p y in each case. separately Important point: As per IAS 1, if in pursuance of default, a loan becomes callable (recall notice), the loan will be taken as current liability irrespective of the repayment schedule.

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Other long term liabilities and p provisions

Other Long Term Liabilities
Other Long term Liabilities shall be classified as:
Trade payables Others

Long-term provisions: The amounts shall be classified as:

Provision P i i f for employee l b benefits. fit Others (specify nature).

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Short-term borrowings
Short-term borrowings shall be classified as:
Loans repayable on demand from banks. from other parties. Loans and advances from related parties parties. Deposits. Other loans and advances (specify nature).

Borrowings shall further be sub-classified sub classified as secured and unsecured. Nature of security shall be specified separately in each case. Where loans have been guaranteed by directors or others others, the aggregate amount of such loans under each head shall be disclosed. Period and amount of default as on the balance sheet date in repayment of loans and interest, shall be specified separately in each case.

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Other current liabilities

Current maturities of long-term debt; Current maturities of finance lease obligations; Interest accrued but not due on borrowings; Interest accrued and due on borrowings; Income received in advance; U Unpaid id di dividends id d Application money received for allotment of securities and due for refund and interest accrued thereon:
Note the distinction between application money going as a part of shareholders funds, and that coming as liability
What is refundable is a liability, what is due for allotment is quasi capital

Also see another slide for details of share application money

Unpaid matured deposits and interest accrued thereon Unpaid matured debentures and interest accrued thereon Other payables (specify nature);

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Share application money gets increased focus

Share application money includes advances towards allotment of share capital.
The meaning of advances towards allotment is not clear

The terms and conditions including the number of shares proposed to be issued, the amount of premium ,if if any, any and the period before which shares shall be allotted shall be disclosed. It shall also be disclosed whether the company has sufficient authorized capital to cover the share capital amount resulting from allotment of shares out of such share application money. F th the Further, th period i df for which hi h the th share h application li ti money h has b been pending di b beyond d th the period for allotment as mentioned in the document inviting application for shares along with the reason for such share application money being pending shall be disclosed:
Quite often, in closely held companies, share application money remains pending for indefinite period Offer document need not lay down a time limit for allotment
However, it is logical that allotment must be made within reasonable period

Share application money not exceeding the issued capital and to the extent not refundable shall be shown under the head Equity and share application money to the extent refundable i.e., the amount in excess of subscription p or in case the requirements q of minimum subscription are not met, shall be separately shown under ther current liabilities

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Tangible assets
Classification shall be given as:
Land. Buildings. Plant and Equipment. q p Furniture and Fixtures. Vehicles. Office equipment. Others ( (specify p y nature). )

Assets under lease shall be separately specified under each class of asset. A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, q through g business combinations and other adjustments j and the acquisitions related depreciation and impairment losses/reversals shall be disclosed separately. Where sums have been written off on a reduction of capital or revaluation of assets or where sums have been added on revaluation of assets, every balance sheet h t subsequent b tt to date d t of f such h write-off, it ff or addition dditi shall h ll show h th the reduced d d or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of such reduction or increase.

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Intangible assets
Assets to be classified as
Goodwill Brands /trademarks. Computer software. Mastheads and publishing titles. Mining rights. Copyrights, and patents and other intellectual property rights, services and operating rights. Recipes, formulae, models, designs and prototypes. Licenses and franchise. Others (specify nature). nature)

A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments j and the related amortization and impairment p losses/reversals shall be disclosed separately. Where sums have been written off on a reduction of capital or revaluation of assets or where sums have been added on revaluation of assets, every balance sheet subsequent to date of such write-off, or addition shall show the reduced or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of such reduction or increase.

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Non-current investments
Non-current investments shall be classified as trade investments and other investments and further classified as:
Investment property; Investments in Equity Instruments; Investments in preference shares Investments in Government or trust securities; ; Investments in debentures or bonds; Investments in Mutual Funds; I Investments t t in i partnership t hi firms fi Other non-current investments (specify nature)

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More on non-current investments

Under each classification classification, details shall be given
of names of the bodies corporate in whom investments have been made and the nature and extent of the investment so made in each such body corporate showing separately investments which are partly-paid indicating separately whether such bodies are
(i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled special purpose entities

In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners partners, total capital and the shares of each partner) shall be given given.

As the word used is bodies corporate, it includes LLPs too. Investments carried at other than at cost should be separately stated specifying the basis for valuation thereof. The following shall also be disclosed
Aggregate amount of quoted investments and market value thereof; Aggregate amount of unquoted investments; Aggregate provision for diminution in value of investments

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More on non current investments

Meaning of subsidiaries, associates and joint ventures
Meaning to be taken as per accounting standards
Subsidiaries
Where control exists

Associates
Where significant influence exists

Joint venture
Where common control exists

Note that the word subsidiary is not to be taken as per Companies Act
As Gen Instructions, definitions as per accounting standards to prevail

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Long-term loans and advances

Long-term loans and advances shall be classified as:
Capital Advances;
What is capital advance? It would be wrong to take this to mean advances for purchase h of f capital it l assets. t It should h ld mean advances d against i t capital it l subscription b i ti since it is a long term advance

Security Deposits; Loans and advances to related parties (giving details thereof); Other loans and advances (specify nature).

The above shall also be separately sub-classified as:

Secured, considered good; Unsecured, Unsecured considered good; Doubtful

Allowance for bad and doubtful loans and advances shall be disclosed under the relevant heads separately. Loans and advances due by directors or other officers of the company or any of them either severally or jointly with any other persons or amounts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated.

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Other non-current assets

Other non-current assets shall be classified as:
Long Term Trade Receivables (including trade receivables on deferred credit terms); Others (specify nature)

Long term Trade Receivables, shall be sub-classified as:

Secured, considered good; Unsecured considered good; Doubtful Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. Debts due by directors or other officers of the company or any of th them either ith severally ll or jointly j i tl with ith any other th person or d debts bt d due b by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated.

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Current investments
Current investments shall be classified as:
Investments in Equity q y Instruments; Investments in preference shares Investments in Government or trust securities; I Investments t t in i debentures d b t or bonds; b d Investments in Mutual Funds; Investments in partnership firms Other non-current investments (specify nature)

Investment in property is conspicuously absent as if property investments cannot be current investments

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More on current investments

Under each classification, details shall be given
of names of the bodies corporate in whom investments have been made and the nature and extent of the investment so made in each such body corporate showing h i separately t l i investments t t which hi h are partly-paid tl id indicating separately whether such bodies are
(i) subsidiaries, (ii) associates, (iii) joint ventures ventures, or (iv) controlled special purpose entities

In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each partner) shall be given.

The following shall also be disclosed

Basis of valuation of individual investments
This clause is difficult to understand it cannot be taken to mean that the basis of valuation of each investment shall be disclosed separately Note that there are variety of approaches to valuation of investments under AS 30

Aggregate amount of quoted investments and market value thereof; Aggregate amount of unquoted investments; Aggregate provision for diminution in value of investments

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Inventories
To be classified as
Raw materials; Work-in-progress; Finished goods; St k i t d (in Stock-in-trade (i respect t of f goods d acquired i df for t trading); di ) Stores and spares; Loose tools; Others (specify nature).

Goods-in-transit shall be disclosed under the relevant sub-head of inventories. Mode of valuation shall be stated.

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Trade receivables
Aggregate amount of Trade Receivables outstanding for a period exceeding six months from the date they are due for payment should be p y stated. separately Trade receivables shall be sub-classified as:
Secured, considered good; Unsecured considered good; g Doubtful.

Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated stated.
Note old Schedule VI referred to companies under the same management

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Cash and cash equivalents

Cash and cash equivalents shall be classified as:
Balances with banks; Cheques drafts on hand; Cheques, Cash on hand; Others (specify nature).

Earmarked balances with banks (for example, example for unpaid dividend) shall be separately stated. Balances with banks to the extent held as margin money or security against the borrowings, borrowings guarantees guarantees, other commitments shall be disclosed separately. Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated. Bank deposits with more than 12 months maturity shall be disclosed separately.

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Short-term loans and advances

Short-term loans and advances shall be classified as:
Loans and advances to related parties (giving details thereof); Others (specify nature) nature).

The above shall also be sub-classified as:

Secured, considered good; Unsecured, Unsecured considered good; Doubtful.

Allowance for bad and doubtful loans and advances shall be disclosed under the relevant heads separately separately. Loans and advances due by directors or other officers of the company or any of them either severally or jointly with any other person or amounts due by firms or private companies respectively in which any director is a partner or a director or a member shall be separately stated.

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Other current assets

This is an all-inclusive heading, which incorporates current assets that do not fit into any other asset categories.

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Contingent liabilities and commitments

Contingent liabilities and commitments (to the extent not provided for) Contingent C liabilities shall be classified f as:
Claims against the company not acknowledged as debt; Guarantees; Other money for which the company is contingently liable

Commitments shall be classified as: Estimated amount of contracts remaining to be executed on capital account and not provided for; Uncalled liability on shares and other investments partly paid Other commitments (specify nature).

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Other disclosures
The amount of dividends proposed to be distributed to equity and preference shareholders for the period and the related amount per share shall be disclosed separately separately. Arrears of fixed cumulative dividends on preference shares shall also be disclosed separately. Where in respect of an issue of securities made for a specific purpose, the whole or part of the amount has not been used for the specific purpose at the balance sheet date, there shall be indicated by way of note how such unutilized tili d amounts t h have b been used d or i invested. t d If, in the opinion of the Board, any of the assets other than fixed assets and non-current investments do not have a value l on realization li ti i in th the ordinary di course of fb business i at t least equal to the amount at which they are stated, the fact that the Board is of that opinion, shall be stated.

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Format of P/L account

Meaning of exceptional and extra ordinary item Extra ordinary items are those that arise other than from ordinary activity of the company Exceptional items arise from ordinary y activity, y, but are not expected to be recurring
Note that IAS 1, para 87 prohibits presentation of extraordinary items in comprehensive income

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Format of P/l account contd

Meaning of discontinuing operations:
IFRS 5 deals with what is discontinued operations where the cashflows of an asset are likely to come from disposal rather than from continuing use of the asset t

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Additional disclosures for P/L account

In respect of a company other than a finance company revenue from operations shall disclose separately in the notes revenue from
sale of products; sale of services; other operating revenues; Less: Excise duty.

In respect of a finance company, revenue from operations shall include revenue from (a) Interest; and (b) Other financial services R Revenue under d each h of f th the above b h heads d shall h ll b be di disclosed l d separately t l b by way of f notes t t to accounts to the extent applicable. Finance costs shall be classified as:
Interest expense; Other borrowing costs; Applicable net gain/loss on foreign currency transactions and translation:
Note that to the extent of foreign borrowing cost being less than domestic borrowing cost, foreign currency translation losses are treated as adjustment to borrowing cost See AS 16, para 4 (e)

Other income to be classified as

Interest Income (in case of a company other than a finance company); Dividend Income; Net gain/loss on sale of investments Other non-operating income (net of expenses directly attributable to such income).

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Additional information in case of all companies p

A Company shall disclose by way of notes additional information regarding aggregate expenditure and income on the following items:(i) in case of all companies
Employee Benefits Expense [showing separately
(i) ( ) salaries and wages, (ii) contribution to provident and other funds, (iii) expense on Employee Stock Option Scheme (ESOP) and Employee Stock Purchase Plan (ESPP), (iv) staff welfare expenses].

(b) Depreciation and amortization expense; (c) Any item of income or expenditure which exceeds one per cent of the revenue from operations or Rs.1,00,000, whichever is higher; (d) Interest Income; (e) Interest Expense; (f) Dividend Income; (g) Net gain/ loss on sale of investments; (h) Adjustments to the carrying amount of investments; (i) Net gain or loss on foreign currency transaction and translation (other than considered as finance cost); (j) Payments to the auditor as
(a) auditor ,(b) for taxation matters, (c) for company law matters, (d) for management services, (e) for other services services, (f) for reimbursement of expenses;

(k) Details of items of exceptional and extraordinary nature; (l) Prior period items;

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Additional information in case of specific p types yp of companies p

In case of manufacturing companies
Raw materials under broad heads. goods purchased under broad heads heads.
Note that the comprehensive information required about raw materials, components etc by existing Schedule VI has been dropped On the contrary, contrary revised Schedule VI states it shall be sufficient compliance if the items are shown under broad heads

In the case of trading companies, purchases in respect of goods traded in by g y the company p y under broad heads. In the case of companies rendering or supplying services, gross income derived form services rendered or supplied under broad heads. In the case of other companies, gross income derived under broad heads.

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Further additional information in case of all companies

In the case of all concerns having works in progress, works-in-progress under broad heads. Information about reserves
The aggregate, if material, of any amounts set aside or proposed to be set aside, to reserve, but not including provisions made to meet any specific liability liability, contingency or commitment known to exist at the date as to which the balance-sheet is made up. The aggregate, if material, of any amounts withdrawn from such reserves. The aggregate, if material, of the amounts set aside to provisions made for meeting specific liabilities contingencies or commitments liabilities, commitments. The aggregate, if material, of the amounts withdrawn from such provisions, as no longer required. Consumption of stores and spare parts. Power and fuel. Rent. Repairs to buildings. Repairs to machinery. Insurance Rates and taxes, taxes excluding, excluding taxes on income Miscellaneous expenses, Dividends from subsidiary companies. Provisions for losses of subsidiary y companies. p

Information about provisions

Expenditure incurred on each of the following items, separately for each item:

Subsidiary companies:

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Profit and loss account also to show by y way y of notes

Value of imports calculated on C.I.F basis by the company during the financial year in respect of
Raw materials; Components and spare parts; Capital goods;

Expenditure in foreign currency during the financial year on account of royalty, know-how, professional and consultation fees, interest, and other matters; Total value if all imported raw materials, spare parts and components consumed during the financial year and the total value of all indigenous raw materials materials, spare parts and components similarly consumed and the percentage of each to the total consumption;
This is the same as in existing Schedule VI It appears that the significance of this disclosure is to give comparison between indigenous and imported raw materials, spare parts and components

The amount remitted during the year in foreign currencies on account of dividends with a specific mention of the total number of non-resident shareholders, the total number of shares held by them on which the dividends were due and the year to which the dividends related; Earnings in foreign exchange classified under the following heads, namely:
Export of goods calculated on F.O.B. basis; Royalty, know-how ,professional and consultation fees .Interest and dividend; Other income, indicating the nature thereof

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Additional disclosures required by other laws

Cashflow statement required in case of listed entities Micro Small and Medium Enterprises law dues to MSMEs Additional disclosures required in case of NBFCs under RBI directions

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Conspicuously absent
Details of managerial remuneration and computation of profits under sec 349,350 Licensed Capacity, installed capacity and actual p production
For an analyst, this was quite a useful information to project the growth of the company

Balance sheet abstract completely goes away

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IAS 1: presentation of financial statements

Highlights
Describes main principles for presentation of general purpose financial statements Statements of Comprehensive Income and Statement of f changes h in i Shareholders Sh h ld Equity E i

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Definitions
General purpose financial statements
Statements not tailored to specific needs IAS IFRS IFRICs SICs May influence economic decisions of users; materiality depends on size and nature of the item Provide narrative information about items presented in the FSs. Notes also contain information about items which do not require or qualify presentation, e.g., off balance sheet items Items of income/exp which are not recognised in P/L a/c as permitted/required by the IFRSs. These include
Changes in revaluation surplus Actuarial gains/losses on employee benefit liabilities Gain/losses on translation of financial statements of foreign operations Gains/losses of AFS assets Effective portion of a cashflow hedge

IFRSs include

Material

N t Notes Other Comprehensive Income

P/l and OCI together are referred as Total comprehensive income

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Balance sheet & P/l to SFP and SoCI

General purpose financial statements traditionally have been
B Balance l sheet h t P/L account Cashflow statement

IAS 1 calls them

Statement of Financial Position Statement of Cashflows Comprehensive Income statement either as one or two components Income statement and Comprehensive Income statement Statement of changes in shareholders equity Notes

Titles are not important

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Compliance with IFRSs

General purpose financial statements shall be prepared in compliance with IFRSs
IAS 1 is not relevant for condensed interim financial statements Applicable to separate as well as consolidated financial statements Applicable to profit oriented entities; terminology may be amended in case of not-for-profit entities

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Elements of financial standards

Contain the following
assets Liabilities Equity Income/exps including gains/losses Contributions to/by owners of the entity in their capacity as owners Cashflows SFP Statement of Comprehensive p Income Changes in equity Cashflow statement Notes comprising of accounting policy and other information In case of a retrospective change of policy policy, the earliest of accountig periods from which the change of policy is applicable

General purpose financial statements

Titles may be different from the above

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Additional optional statements

Entities may optional present statements such as value added, environmental reports, human resources accounting etc These statements are beyond y IFRSs

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General features
Fair and faithful compliance with the IFRSs and the Framework
If there is no IRFS on a particular matter, then as per the hierarchy set by IAS 8 Cannot rectify inappropriate accounting policy by mere disclosure in the notes
In other words, notes do not by themselves correct deficiency in financial statements notes are explanatory material

In rare circumstances, entity will depart from IFRSs, if the regulation does not prohibit the same
In case of a departure, entity shall disclose
that management has concluded that the financial statements present fairly the entitys financial position, financial performance and cash flows; that it has complied with applicable IFRSs, except that it has departed from a particular requirement to achieve a fair presentation; the title of the IFRS from which the entity has departed, the nature of the departure, including the treatment that the IFRS would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the Framework, and the treatment adopted; for each period presented, the financial effect of the departure on each item in the financial statements that would p in complying p y g with the requirement. q have been reported

If there has been a departure in the past, which affects current years results, such impact shall be disclosed

If the entity opines that adherence to IFRS will present misleading presentation, then in rare circumstances, it may depart, disclosing
the title of the IFRS in question, the nature of the requirement, and the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in the Framework; and for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to achieve a fair presentation. What are those circumstances How do the same differ from ordinary circumstances

If departure from IFRS is justified by special circumstances of the entity

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Basic presentation issues

Going concern:
Accounts are prepared under going concern presumption

Accrual Materiality and aggregation

Each ac material ate a c class ass is s sepa separately ate y p presented; ese ted; d dissimilar ss a items te s are not aggregated

Offsetting
Assets/liabilities and incomes/exps are not mutually offset Netting is permitted only in limited circumstances
E.g., exps on disposal of non current assets Reimbursements by y a third p party y Gains and losses from foreign exchange translation However, if material, disclosed separately

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Other presentation issues

Frequency of reporting Consistency of presentation
Presentation should be retained from period to period
Unless the nature of the entitys business changes, or Ifrs requires different presentation

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Structure and content of financial statements

Identification each financial statement shall be identified by its caption. In addition, the following should be prominently stated:
the name of the reporting entity or other means of identification, and any change in that information from the end of the preceding reporting period; whether the financial statements are of an individual entity or a group of entities; the date of the end of the reporting period or the period covered by the set of financial statements or notes; the presentation currency, as defined in IAS 21; and the level of rounding g used in presenting p g amounts in the financial statements:
Under IFRSs, thousands or millions is acceptable

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Contents of SFP
As a minimum, the following should be disclosed
(a) property, plant and equipment; (b) investment property; (c) intangible assets; (d) financial assets (excluding amounts shown under (e), (h) and (i)); (e) investments accounted for using the equity method; (f) bi biological l i l assets; t (g) inventories; (h) trade and other receivables; (i) cash and cash equivalents; (j) the total of assets classified as held for sale and assets included in disposal groups classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations p ; (k) trade and other payables; (l) provisions; (m) financial liabilities (excluding amounts shown under (k) and (l)); (n) liabilities and assets for current tax, as defined in IAS 12 Income Taxes; (o) deferred tax liabilities and deferred tax assets, as defined in IAS 12; ( ) li (p) liabilities biliti i included l d di in disposal di l groups classified l ifi d as held h ld for f sale l in i accordance with IFRS 5; (q) non-controlling interests, presented within equity; and (r) issued capital and reserves attributable to owners of the parent. If items are sufficiently different to warrant separate presentation presentation, they should be disclosed separately
Based on Nature and liquidity Function Amount nature and timing of liabilities

Other items as appropriate should be disclosed

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Current non-current distinction

Current/non-current C t/ t distinction di ti ti should h ld be b made d in i case of f assets/liabilities t /li biliti except t where liquidity-based balance sheet is drawn Where an asset/liability aggregates items to be recovered/settled (monetary assets/monetary liabilities), amounts recoverable/payable within 12 months, and after 12 months, , to be separately p y recorded In case of certain entities, such as financial institutions, there is no clear operating cycle
Hence presenting assets in increasing/decreasing order of liquidity gives better information

Deferred tax assets/liabilities shall not be classified as current Wh t is What i current t asset: t an asset t that th t the th entity tit
expects to realise the asset, or intends to sell or consume it, in its normal operating cycle; it holds the asset primarily for the purpose of trading; it expects to realise the asset within twelve months after the reporting period; or the asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. it expects to settle the liability in its normal operating cycle; it holds the liability primarily for the purpose of trading; the liability is due to be settled within twelve months after the reporting period; or the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

What is current liability

All other assets/liabilities are non-current

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More on current liabilities

If the provisions of a long term loan are breached, so that it becomes payable on demand, it is classified as current liability
Unless lender grants a grace period of more than 12 months

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Sub classification of assets/liabilities

The following subclassifications appear either in the SFS or by way of notes
property, plant and equipment are disaggregated into classes in accordance with IAS 16; receivables are disaggregated into amounts receivable from trade customers, receivables from related parties, parties prepayments and other amounts; inventories are disaggregated, in accordance with IAS 2 Inventories, into classifications such as merchandise, production supplies, materials, work in progress and finished goods; provisions are disaggregated into provisions for employee benefits and other items; and equity capital and reserves are disaggregated into various classes, such as paid-in capital, share premium and reserves reserves.

Following further information about equity

(a) for each class of share capital:
(i) the number of shares authorised; (ii) the number of shares issued and fully paid paid, and issued but not fully paid; (iii) par value per share, or that the shares have no par value; (iv) a reconciliation of the number of shares outstanding at the beginning and at the end of the period; (v) the rights, preferences and restrictions attaching to that class including restrictions on the distribution of dividends and the repayment of capital; (vi) shares in the entity held by the entity or by its subsidiaries or associates; and (vii) shares reserved for issue under options and contracts for the sale of shares, including terms and amounts; and

(b) a description of the nature and purpose of each reserve within equity.

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Comprehensive income statement

Entity shall prepare either a single Comprehensive Income statement or two statements, one Income statement, and other OCI Minimum contents of SCI
( (a) ) revenue; (b) finance costs; (c) share of the profit or loss of associates and joint ventures accounted for using the equity method; (d) tax expense; (e) a single amount comprising the total of:
(i) the post-tax profit or loss of discontinued operations and (ii) the post-tax gain or loss recognised on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation;

(f) profit or loss; (g) each component of other comprehensive income classified by nature (excluding amounts in (h)); (h) share of the other comprehensive income of associates and joint ventures accounted for using the equity method; and (i) total comprehensive income.

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Classification of expenses
Based on nature of expense Or based on function of the expense

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Statement of changes in equity

Shall contain the following: total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to noncontrolling interests; for each component of equity, the effects of retrospective application pp or retrospective p restatement recognised g in accordance with IAS 8; for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately t l disclosing di l i changes h resulting lti from: f
(i) profit or loss; (ii) each item of other comprehensive income; and (jii) transactions with owners in their capacity as owners owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control.

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Notes
Contents
present information about the basis of preparation of the financial statements and the specific accounting policies used disclose the information required by IFRSs that is not presented elsewhere in the financial statements; and provide information that is not presented elsewhere in the financial statements b statements, but t is rele relevant ant to an understanding nderstanding of an any of them them.

Order generally recommendable order

a) statement of compliance with IFRSs (b) summary of significant accounting policies applied (c) supporting information for items presented in the SFP, SOCI, SOCE, CFS, in the order in which each statement and each line item is presented; (d) other disclosures, including:
(i) contingent liabilities (see IAS 37) and unrecognised contractual commitments, and (ii) non-financial disclosures, eg the entitys financial risk management objectives and policies (see IFRS 7).

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Disclosures in notes
Accounting policies
An entity shall disclose in the summary of significant accounting policies:
(a) the measurement basis (or bases) used in preparing the financial statements, and (b) the other accounting policies used that are relevant to an understanding of the financial statements.

Disclosure of judgement that management has made in applying accounting policies and the significant impact thereof
Examples of judgement
Classification of financial instruments as HTM Whether risks/rewards of ownership have been transferred in financial leases Whether a special purpose entity should be regarded as subsidiary

Assumptions involving uncertainty

An entity shall disclose information about the assumptions it makes about the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant f risk of f resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

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Other disclosures
M Management t of f capital it l
An entity shall disclose information that enables users of its financial statements to evaluate management of capital (eg., regulatory or economic capital)
a description of what it manages as capital;
when an entity is subject to externally imposed capital requirements, the nature of those requirements and how those requirements are incorporated into the management of capital; and how it is meeting its objectives for managing capital.

summary quantitative data about what it manages as capital e.g., subordinated liabilities may be regarded as capital any changes in the above from the previous period. whether during the period it complied with any externally imposed capital requirements to which it is subject. when the entity has not complied with such externally imposed capital requirements requirements, the consequences of such non-compliance

Puttable financial instruments treated as equity

summary quantitative data about the amount classified as equity; its objectives, policies and processes for managing its obligation to repurchase or redeem the instruments the expected cash outflow on redemption or repurchase of that class of financial instruments; and information about how the expected cash outflow on redemption or repurchase was determined. the amount of dividends proposed or declared before the financial statements were authorised for issue but not recognised as a distribution to owners during the period, and the related amount per share; and the amount of any cumulative preference dividends not recognised.

Other disclosures

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More disclosures
the domicile and legal form of the entity, its country of incorporation and the address of its registered office (or principal place of business, if different from the registered office); a description of the nature of the entitys operations and its principal activities; the name of the parent and the ultimate parent of the group; and if it is a limited life entity, information regarding the length of its life.

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